A Time to Pay arrangement is an agreement with HMRC to pay a tax bill you cannot afford in full by monthly instalments. If you owe £30,000 or less in Self Assessment tax, are up to date with your returns and have no other tax debts or payment plans, you can usually set one up online without speaking to anyone. Larger debts, company taxes and longer plans are agreed by phone, and interest is charged on the unpaid tax throughout.

This guide explains who can get Time to Pay, how to apply, what HMRC will ask you, how much you will be expected to pay each month and what happens if a plan breaks down, with a worked example for a Bolton sole trader.

What is a Time to Pay arrangement?

Time to Pay is HMRC’s name for a payment plan on an overdue or soon-to-be-due tax bill. It covers most taxes, including Self Assessment, PAYE and National Insurance, VAT and corporation tax. HMRC checks that the plan is affordable and that you can keep up with future tax as well as the arrears.

Key features:

• You pay by monthly Direct Debit from a UK bank account.
• Interest is charged on the outstanding balance at HMRC’s late payment rate, which has been the Bank of England base rate plus 4% since 6 April 2025.
• If you agree the plan in time and keep to it, you can avoid some late payment penalties.

A Time to Pay arrangement is not a reduction of the debt. You still pay the full tax, plus interest, just over a longer period.

Who can set up Time to Pay online?

Self Assessment

You can use HMRC’s online service to set up a Self Assessment payment plan if you:

1. Owe £30,000 or less.
2. Are up to date with your tax returns.
3. Have no other tax debts.
4. Have no other HMRC payment plans in place.

You must have filed your Self Assessment return before you can set up a plan, because HMRC needs to know the amount due. If you are close to the 31 January deadline and cannot pay, file the return first, then apply. Our Self Assessment deadline guide has the key dates.

Businesses: PAYE, VAT and corporation tax

Employers and VAT-registered businesses can check whether they are eligible for an online plan through their HMRC business tax account. Where the online service is not available, or the debt is larger, you call HMRC’s Payment Support Service.

For company tax debts, HMRC expects the company to reduce the debt as much as it can before a plan is agreed. It may ask directors to put in personal funds, arrange borrowing or extend credit. A business that wants to keep CIS gross payment status should also agree a plan before a payment is late, as late payments count against the compliance test.

Time to Pay limits and options at a glance

Situation	How to arrange	What HMRC looks at
Self Assessment, £30,000 or less, returns filed, no other debts	Online, no call needed	Affordability, set by you within the service
Self Assessment over £30,000, or longer plan needed	Phone HMRC	Income, spending, savings, assets
Employer PAYE or VAT	Online if eligible, otherwise phone	Business cash flow, future liabilities
Corporation tax	Phone HMRC	Company finances, director support
Bill not yet due, want to save towards it	Self Assessment Budget Payment Plan	Must be up to date with past bills

How to apply for Time to Pay by phone

Before you call, prepare the figures HMRC will ask for. It wants to know:

• Whether you can pay any of the debt straight away.
• How much you can pay each month.
• Whether you owe any other taxes.
• Your income, your usual monthly spending and any savings or investments.

HMRC will expect you to use savings or other assets to reduce the debt as much as possible. It will usually ask you to pay around half of your monthly surplus, which is what you have left after rent or mortgage, food, utilities and other fixed costs. A pension counts as income, but HMRC does not count the value of your pension pot as savings. If you have had independent debt advice, HMRC accepts a Standard Financial Statement as evidence of your income and spending.

For a business, have a cash flow forecast for the next 12 months, details of other creditors, and an explanation of why the bill cannot be paid and what has changed. Showing that the business can pay its future tax on time is just as important as the plan for the arrears.

Worked example: a Time to Pay plan for a Bolton hairdresser

Sophie is a self-employed hairdresser in Farnworth. Her Self Assessment balancing payment of £4,800 is due on 31 January 2027, and a quiet autumn has left her short. She has filed her return, has no other tax debts and no other payment plans, so she can apply online.

	Per month
Take-home income	£2,600
Rent, food, utilities and other fixed costs	£1,800
Monthly surplus	£800
Half of surplus (HMRC’s usual starting point)	£400

At £400 a month, the £4,800 is cleared in 12 instalments, plus interest on the reducing balance. Because she sets the plan up before the first late payment penalty date, she should avoid the 5% penalties as long as she keeps up every payment. Sophie must also budget for her 31 July payment on account, as a plan covers the existing debt, not future bills. The figures are illustrative.

Time to Pay and penalties

For Self Assessment, late payment penalties are 5% of the unpaid tax at 30 days, 6 months and 12 months after the due date. HMRC’s guidance confirms that if you propose an acceptable Time to Pay arrangement before a penalty date, that penalty is held while you keep to the plan and cancelled when the plan is completed. If you only ask after the first penalty date, you can still avoid the later ones.

Interest is different. It is charged from the day after the due date until the tax is paid, whether or not you have a plan. Paying more than the agreed amount, or clearing the plan early, reduces the interest.

What happens if you miss a Time to Pay payment?

Contact HMRC as soon as you know a payment will be missed. HMRC will contact you to find out why if a payment fails, and it may be possible to change the plan if your circumstances have changed. If the arrangement is cancelled because of default:

• Any penalties that were held become payable.
• HMRC can pursue the full debt, using debt collection agencies, recovering through your PAYE tax code, taking money directly from bank accounts for debts of £1,000 or more, or taking control of goods.

Tips for a successful Time to Pay arrangement

• Ask early. HMRC is far more flexible before a debt is overdue than after enforcement has started.
• Offer what you can afford, not what you hope to afford.
• Keep filing every return on time while the plan runs.
• Set aside tax on future income so you do not build up a new debt.
• Get your accountant to prepare the figures and speak to HMRC for you.

Frequently asked questions

Get help with a Time to Pay arrangement

Dealing with HMRC when money is tight is stressful. Cangaf’s ACCA-qualified team in Bolton can prepare your figures, propose a realistic Time to Pay plan and speak to HMRC on your behalf, whether you are a sole trader or a company needing business tax advice. Request a fixed-fee quote and we will help you get back on track.

Official guidance: If you cannot pay your tax bill on time, Setting up a payment plan, How much you’ll pay and What will happen if you do not pay your tax bill.